It's Tax Day in America. Do you...

[ClassicHasClass]

I mean, there's a lot of boxes on that form, but if you actually read it it's basically writing out the steps of how to build an Excel spreadsheet to do it for you.

The really stupid thing is in many other countries, the government sends you the information they have and if you agree you just sign it and send it back with your payment (if you owe anything). You only need to fill out forms if you have complications that the government doesn't know about (which is less likely because the tax code is usually simpler).

My wife does an Australian tax return. I'd rather do an Australian tax return than the monstrosity we file every year.

[jeffandnicole]

They need to make sure your math is correct and that the return isn't being filed fraudulently.

Government: You owe us money. It's called taxes.

Me: How much do I owe?

Gov't: You have to figure that out.

Me: I just pay what I want?

Gov't: Oh, no we know exactly how much you owe. But you have to guess that number too.

Me: What if I get it wrong?

Gov't: You go to prison.

Although to be fair, almost no one goes to prison. Prison is saved for the most fraudulent of returns.  Here's one example:

The owner of Manco & Manco, which has a small chain of pizzerias with 3 of them on the Ocean City NJ Boardwalk, went to jail several years back for fraudulent returns. 

Those boardwalk locations only take cash. 

This is what I imagine took place (this is just me thinking out loud; I don't know any details behind the investigation other than in the link below):

Manco & Manco is very popular, and sells a lot of pizzas.

There are numerous other pizzerias on the OCNJ Boardwalk.

When Manco & Manco did their taxes, they hid a lot of their cash revenues, but reported all of their expenses.

Other less-popular pizzerias did their taxes more honorably, and showed a much greater level of revenues.

Go back 4 sentences.  Manco & Manco is very popular.  IRS agents have families and visit OCNJ on their summer vacations and are familiar with Manco & Manco.

Someone clued in that the revenue Manco & Manco had been reporting on their taxes is way out of line compared to their expenses, and compared to other less-popular pizzerias in OCNJ.

The IRS investigates the owners, a husband and wife.

IRS determines the owners hid a lot of money by depositing it into their personal accounts rather than the business accounts.

Wife also lied to investigators.

Wife gets probation. Husband gets 15 months jail time.  Judge has a heart and allows the husband to work the summer season, and sets his jail sentence to begin after Labor Day.

https://www.justice.gov/usao-nj/pr/owners-popular-ocean-city-new-jersey-pizza-restaurants-sentenced-tax-evasion-structuring

[Rothman]

Yes but you're not questioning other forum members about the legitimacy of their claimed business expenses are you?

Yes I am. You and Rothman both.

Wait, how'd I get dragged into this?

[JayhawkCO]

Yes but you're not questioning other forum members about the legitimacy of their claimed business expenses are you?

Yes I am. You and Rothman both.

Wait, how'd I get dragged into this?

Because I'm a skeptic. (I picked two of the people on here who seemingly can take a joke.)

[Rothman]

Yes but you're not questioning other forum members about the legitimacy of their claimed business expenses are you?

Yes I am. You and Rothman both.

Wait, how'd I get dragged into this?

Because I'm a skeptic. (I picked two of the people on here who seemingly can take a joke.)

*writes it off on his taxes*

[Max Rockatansky]

Yes but you're not questioning other forum members about the legitimacy of their claimed business expenses are you?

Yes I am. You and Rothman both.

Wait, how'd I get dragged into this?

Because I'm a skeptic. (I picked two of the people on here who seemingly can take a joke.)

*writes it off on his taxes*

Ah, seems I didn't realize this was an audit.

[kkt]

None of the options in the poll applies to me, which is surprising since I don't think my situation is terribly unusual.

I filed for an extension, and I expect to get a refund when my return is actually prepared.

One of the places that sends me information didn't get it to me by mid-February and my CPA's deadline for filing by April 15 was the beginning of March, and I was traveling in some of March.

I started using a CPA when my dad was so poorly off that he couldn't manage his finances.  He had a small rental property, so there was income and deductions from it to count up, and the property was in California so he had both Federal and California returns to do, so I found a CPA who knew how to do California returns.  Now I might be able to do them by myself but it would still be painful so I keep using the CPA.

Do keep in mind that the IRS employees didn't decide to make the tax code complicated.  They're the prisoners of Congress just like taxpayers are.

Getting a refund doesn't bother me.  Yes, it's a 0-interest loan to the government, but what else would I do with the money?  It would be short-term because I know I'll need it in 15 months or less.  It would need to be secure so that I'm not caught short if there's a market downturn in April.  That pretty much leaves savings accounts, which are a 0-interest loan to a bank...

[kernals12]

They need to make sure your math is correct and that the return isn't being filed fraudulently.

Government: You owe us money. It's called taxes.

Me: How much do I owe?

Gov't: You have to figure that out.

Me: I just pay what I want?

Gov't: Oh, no we know exactly how much you owe. But you have to guess that number too.

Me: What if I get it wrong?

Gov't: You go to prison.

Although to be fair, almost no one goes to prison. Prison is saved for the most fraudulent of returns.  Here's one example:

The owner of Manco & Manco, which has a small chain of pizzerias with 3 of them on the Ocean City NJ Boardwalk, went to jail several years back for fraudulent returns. 

Those boardwalk locations only take cash. 

This is what I imagine took place (this is just me thinking out loud; I don't know any details behind the investigation other than in the link below):

Manco & Manco is very popular, and sells a lot of pizzas.

There are numerous other pizzerias on the OCNJ Boardwalk.

When Manco & Manco did their taxes, they hid a lot of their cash revenues, but reported all of their expenses.

Other less-popular pizzerias did their taxes more honorably, and showed a much greater level of revenues.

Go back 4 sentences.  Manco & Manco is very popular.  IRS agents have families and visit OCNJ on their summer vacations and are familiar with Manco & Manco.

Someone clued in that the revenue Manco & Manco had been reporting on their taxes is way out of line compared to their expenses, and compared to other less-popular pizzerias in OCNJ.

The IRS investigates the owners, a husband and wife.

IRS determines the owners hid a lot of money by depositing it into their personal accounts rather than the business accounts.

Wife also lied to investigators.

Wife gets probation. Husband gets 15 months jail time.  Judge has a heart and allows the husband to work the summer season, and sets his jail sentence to begin after Labor Day.

https://www.justice.gov/usao-nj/pr/owners-popular-ocean-city-new-jersey-pizza-restaurants-sentenced-tax-evasion-structuring

One wonders how such tax evasion will continue as cash becomes less and less popular.

[seicer]

Why would one "wonder"? Off-shoring is still popular, and just because a lot of our transactions are electronic doesn't mean someone can't evade paying taxes.

[mgk920]

How long before someone makes a federal case out of extending last year's 'Chevron' decision by the USSupreme Court to the Income tax (You must cover ALL of the costs that I incurred while complying with your laws)?  Effects?

 

Mike

[kphoger]

The really stupid thing is in many other countries, the government sends you the information they have and if you agree you just sign it and send it back with your payment (if you owe anything). You only need to fill out forms if you have complications that the government doesn't know about ...

It's incredible how commonsense that is.

Other than corporate insurance plans, is there any other situation in which the 'customer' has to figure out for himself what amount the 'company' should invoice him for?

[kernals12]

Why would one "wonder"? Off-shoring is still popular, and just because a lot of our transactions are electronic doesn't mean someone can't evade paying taxes.

No, but clearly it would make tax evasion a lot harder. There's a reason that tax cheats prefer cash.

[kernals12]

The really stupid thing is in many other countries, the government sends you the information they have and if you agree you just sign it and send it back with your payment (if you owe anything). You only need to fill out forms if you have complications that the government doesn't know about ...

It's incredible how commonsense that is.

Other than corporate insurance plans, is there any other situation in which the 'customer' has to figure out for himself what amount the 'company' should invoice him for?

For most people, a tax return is an invoice to the Government.

[kphoger]

For most people, a tax return is an invoice to the Government.

A tax return tells you how much money you owe the government—i.e. an invoice.  Getting a refund or having to pay more at that point is just an adjustment based on how much you've already pre-paid on the invoice.

[SEWIGuy]

The really stupid thing is in many other countries, the government sends you the information they have and if you agree you just sign it and send it back with your payment (if you owe anything). You only need to fill out forms if you have complications that the government doesn't know about ...

It's incredible how commonsense that is.

Other than corporate insurance plans, is there any other situation in which the 'customer' has to figure out for himself what amount the 'company' should invoice him for?

It isn't commonsense in a taxation system where you have so many deductions. The IRS doesn't know what my mortgage interest is. They don't know how much I have contributed to my IRA, paid in student loans, etc. etc.

I guess what they could do is send you a "here's what you owe if you took the standard deduction," and then you would need to log into a system to itemize or something. That would be roughly akin to a customer asking for a rebate.

[kphoger]

It isn't commonsense in a taxation system where you have so many deductions. The IRS doesn't know what my mortgage interest is. They don't know how much I have contributed to my IRA, paid in student loans, etc. etc.

And I'd argue that those things affecting your tax liability is not a commonsense taxation system.

[SEWIGuy]

It isn't commonsense in a taxation system where you have so many deductions. The IRS doesn't know what my mortgage interest is. They don't know how much I have contributed to my IRA, paid in student loans, etc. etc.

And I'd argue that those things affecting your tax liability is not a commonsense taxation system.

I disagree. Giving people financial incentive to do good things (gifts to charity, home ownership, save for retirement) is a great way to motivate them to do those things.

[vdeane]

It isn't commonsense in a taxation system where you have so many deductions. The IRS doesn't know what my mortgage interest is. They don't know how much I have contributed to my IRA, paid in student loans, etc. etc.

I guess what they could do is send you a "here's what you owe if you took the standard deduction," and then you would need to log into a system to itemize or something. That would be roughly akin to a customer asking for a rebate.

Given how much information banks report to the federal government (to the point where many banks outside the US refuse to open accounts to people with American citizenship), they probably do know all that.  In fact, I've been reading this year that pretty much every electronic transaction gets reported to the IRS (certainly anything involving banking/ACH, but possibly even credit card transactions).

[kernals12]

It isn't commonsense in a taxation system where you have so many deductions. The IRS doesn't know what my mortgage interest is. They don't know how much I have contributed to my IRA, paid in student loans, etc. etc.

And I'd argue that those things affecting your tax liability is not a commonsense taxation system.

I won't argue with that. But it's the taxation system that we've wound up with as a result of the efforts of lobbyists and influence peddlers.

It isn't commonsense in a taxation system where you have so many deductions. The IRS doesn't know what my mortgage interest is. They don't know how much I have contributed to my IRA, paid in student loans, etc. etc.

I guess what they could do is send you a "here's what you owe if you took the standard deduction," and then you would need to log into a system to itemize or something. That would be roughly akin to a customer asking for a rebate.

Given how much information banks report to the federal government (to the point where many banks outside the US refuse to open accounts to people with American citizenship), they probably do know all that.  In fact, I've been reading this year that pretty much every electronic transaction gets reported to the IRS (certainly anything involving banking/ACH, but possibly even credit card transactions).

If the IRS knew all that, then they wouldn't be losing $600 billion a year to evasion.

And no, not every electronic transaction is reported to the IRS,  if they were, then it would mean you'd receive a 1099 every time you were Venmo'd $20 for dinner by your best friend. Beginning in 2026 electronic payment platforms will begin producing 1099Ks for transactions of over $600.

[kphoger]

Giving people financial incentive to do good things (gifts to charity, home ownership, save for retirement) is a great way to motivate them to do those things.

I agree that it's good to incentivize doing good things.  But I disagree that it's commonsense for that to be done in the form of income tax adjustments.

[kphoger]

And no, not every electronic transaction is reported to the IRS, they were, then it would mean you'd receive a 1099K every time you were Venmo'd $20 for dinner by your best friend.

Please explain how that would fall under the requirements of the 1099-K.

"Payments you got from family and friends should not be reported on Form 1099-K."  —the IRS

[kernals12]

And no, not every electronic transaction is reported to the IRS, they were, then it would mean you'd receive a 1099K every time you were Venmo'd $20 for dinner by your best friend.

Please explain how that would fall under the requirements of the 1099-K.

"Payments you got from family and friends should not be reported on Form 1099-K."  —the IRS

Exactly, so contrary to what Vdeane claimed, not every electronic transaction is reported to the IRS

[kernals12]

It isn't commonsense in a taxation system where you have so many deductions. The IRS doesn't know what my mortgage interest is. They don't know how much I have contributed to my IRA, paid in student loans, etc. etc.

And I'd argue that those things affecting your tax liability is not a commonsense taxation system.

I disagree. Giving people financial incentive to do good things (gifts to charity, home ownership, save for retirement) is a great way to motivate them to do those things.

Why is home ownership "good"?

[SEWIGuy]

It isn't commonsense in a taxation system where you have so many deductions. The IRS doesn't know what my mortgage interest is. They don't know how much I have contributed to my IRA, paid in student loans, etc. etc.

I guess what they could do is send you a "here's what you owe if you took the standard deduction," and then you would need to log into a system to itemize or something. That would be roughly akin to a customer asking for a rebate.

Given how much information banks report to the federal government (to the point where many banks outside the US refuse to open accounts to people with American citizenship), they probably do know all that.  In fact, I've been reading this year that pretty much every electronic transaction gets reported to the IRS (certainly anything involving banking/ACH, but possibly even credit card transactions).

I'm sure the transaction is reported. Does tht IRS know how much of my mortgage payment is principal, interest and escrow? And what the escrow is for?

[SEWIGuy]

It isn't commonsense in a taxation system where you have so many deductions. The IRS doesn't know what my mortgage interest is. They don't know how much I have contributed to my IRA, paid in student loans, etc. etc.

And I'd argue that those things affecting your tax liability is not a commonsense taxation system.

I disagree. Giving people financial incentive to do good things (gifts to charity, home ownership, save for retirement) is a great way to motivate them to do those things.

Why is home ownership "good"?

There are all sorts of reasons why home ownership is good. Children benfit from a more stable environment. Home ownership usually means people who are more vested in their communities. It almost always the first or second source of individual wealth for most Americans, etc. etc. etc.